* Buys Air Europa for 1 bln euros
* To be funded by external debt
* Shares rise more than 2%
* To be run by Iberia CEO
* Regulators may set requirements -analysts
(Adds Brazil, paragraphs 11,12)
By Yadarisa Shabong
Nov 4 (Reuters) - IAG, the parent of British
Airways and Spain's Iberia, announced a 1 billion euro ($1.12
billion) takeover of Spain's Air Europa to boost its presence on
routes to Latin America and the Caribbean.
The deal follows a setback in Latin America for IAG after
Chile's Supreme Court ruled against a plan that would have
allowed it to bolster cooperation with partners in the oneworld
airlines alliance.
Chile's LATAM Airlines in September then announced
it planned to leave the alliance, opting instead for a tie-up
with SkyTeam member Delta Air Lines.
IAG shares initially rose more than 2% following the Air
Europa takeover announcement but some analysts said IAG may have
to shed routes in order to win regulatory approval.
IAG shares were up 1.2% at 1315 GMT.
Ryanair CEO Michael O'Leary said his company will ask the
UK's market watchdog to force IAG to make divestments as part of
its Air Europa takeover, a deal he said would be bad for
competition.
"Potential remedies, perhaps in the form of slot release or
behavioural restrictions, may be required and these could impact
the potential synergies," an analyst at Liberum wrote in a note.
IAG also owns carriers Iberia Express, Level, Ireland's Aer
Lingus and Vueling.
"We are not convinced that having just another brand
platform is the optimal move, and could see it potentially
combining with Level, Vueling or potentially Iberia Express
after some time," analysts at Bernstein said.
Air Europa serves 69 destinations, including long-haul
routes to the Americas and the Caribbean. It had a fleet of 66
aircraft at the end of 2018.
Air Europa's Spanish parent company Globalia earlier this
year received authorisation from the Brazilian government to
explore the possibility of flying domestic routes within Latin
America’s largest economy.
It is unclear if that authorisation will remain with
Globalia or be transferred to IAG.
Air Europa will initially keep its brand and as it gets
integrated into the existing hub at Madrid it will be a
standalone operation run by Iberia boss Luis Gallego, IAG said.
It will also withdraw Air Europa from the SkyTeam alliance
once the deal is completed. Air Europa has a joint venture with
Air France-KLM.
"This is of strategic importance for the Madrid hub, which
in recent years has lagged behind other European hubs," said
Gallego, adding that Madrid had the potential to serve as a
gateway between Asia and Latin America.
IAG said it expected the Air Europa deal, which will be
funded through external debt, to close in the second half of
next year and for it to add to its earnings in the first full
year after the closure.
($1 = 0.8951 euros)
(Reporting by Yadarisa Shabong in Bengaluru; additional
reporting by Andres Gonzalez in Madrid and Marcelo Rochabrun in
Sao Paulo, editing by Patrick Graham and Jason Neely)